Utah tax revenue leans heavily on income, consumption

According to a new Tax Foundation analysis of Census Bureau data on state and local government tax revenues, state and local governments in Utah rely more on individual and corporate income taxes and sales taxes, and less on property taxes, than the rest of the nation, on average.

According to the report, state and local government tax revenues in 2010 broke down as follows: 35 percent property tax, 34 percent sales tax, 20 percent individual income tax, and 3 percent corporate income tax (other taxes and fees represent the remaining 8 percent). In Utah, on the other hand, the breakdown was 27.6 percent property tax, 37.5 percent sales tax, 25.3 percent individual income tax, and 3 percent corporate income tax (other taxes and fees were 6.6 percent). Presumably, a primary reason why the property tax portion of tax revenues in Utah is lower than rest of the nation is due to the state’s Truth in Taxation law, which requires an advertised public hearing whenever an increase in property tax revenues is proposed.

This seemingly academic question on the structure of tax revenues in a state has real impacts on Utahns’ lives. According to economic research on this issue, different forms of taxes impact economic growth differently, and thus the ability of Utahns to get a good job and earn the income they need to support their families. The results of this research suggest that the tax that harms the economy the most (and thus jobs and incomes) is corporate income taxes, followed by individual income taxes, sales taxes, and property taxes.

There is no single answer to the question of what the best structure/mix of tax revenues is, and there are non-economic factors that should be considered, and perhaps take precedence (e.g., fairness) concerning this policy question. But knowing what Utah’s tax structure is and how that likely is impacting economic growth and prosperity is a critical component to making good tax policy decisions for Utahns.

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